Engage, then see: Tim Murphy reads between the lines of the NZME-Fairfax merger bid

Former Herald editor-in-chief Tim Murphy has now read the 130-page media mega-merger application to the Commerce Commission three times. Here he examines the central argument, along with the long bows, flying pigs, and echoes of Napoleon.

They must have smiled at times in the flash headquarters of NZME and the “character” K Rd digs of Fairfax NZ as they wrote their merger application to the Commerce Commission.

The drafting would have started a long time ago. You don’t, as media commentator Gavin Ellis observed this week, write a 130-page document and commission an economic study in the space of the couple of weeks since the public learned of the plans.

Someone must have been given the challenge of arguing Less is More; someone the assembling of the The Internet Ate My Company lines and a committee would finesse the Everything is Awesome theme for the future.

The biggest laughs would have been when the people charged with listing “competitors” for the new company came up with their 13 pages of creative thinking.

Each entry, from the Wairoa Star and the bimonthly Bay Buzz from Hawkes Bay through the Auckland University of Technology’s AUT Briefing Papers and Ian Wishart’s Investigate magazine, to TradeMe, Pinterest and YouTube is offered straight-faced.

Even a potential new news website I proposed with Mark Jennings last week, the day before the application was submitted, gets a reference.

Newshub’s new app is praised with great faintness for having taken the market by storm in its first 18 hours on the market. TVNZ On Demand is lauded for its growth. The Spinoff is mentioned 11 times. Competitors all.

Spinoff, Scout, MurphJen: the brave new world

Which might be arguable. Kind of. If you were chucking everything at a non-media body charged with approving the merger of New Zealand’s two biggest news websites, vastly dominant newspaper duopoly and twin megaphones of media influence.

The application wanted to show that

a) it is too tough out there with Facebook and Google hoovering up all the advertising revenue

b) no one can “dominate” the news and advertising market or limit competition substantially because so many platforms, multimedia companies and new entrants have emerged and

c) a merged entity won’t be able to whack up prices, or reduce journalistic quality because readership would fall and ad revenues would drift away.

Indeed it showed the two big social and search platforms win agency-booked advertising revenue at a factor of five to one against NZME and Fairfax combined. The 13 pages of competitors were intended to prove point c. And a tenuous few pages tried to make the case that journalistic quality would have to improve under a combined company.

The application promises that after “synergies” from bringing the two operations together there will be benefits for advertisers, readers and even the plurality of voices in the country’s media.

You can almost feel the debate among the drafters of the application when someone said they needed to get on the front foot about quality journalism and enhancing the plurality of voices.

“Can we seriously suggest that?”

“Yes, why not? By putting two into one we preserve voices that are there already that might otherwise go, and we leave space for other voices to rise up.”

It is the longest of some pretty long bows in the document.

Undoubtedly the merging of these two companies will allow them to “de-duplicate” many things that they both do – and probably reduce overall headcount by something like 750 people from the current 3300. It is difficult to estimate from the outside what the number will be – for example the NZME radio operations could be unscathed as there is no Fairfax equivalent, and the GrabOne daily deals site is in a similar place.

The application says a merger will provide “a sounder financial foundation to address the rapid and long-term structural changes affecting the industry”.

In order to support the investment required to continue to deliver high quality local and regional news, life and style, sport and entertainment content to New Zealanders, both companies must continue to restructure/adapt their businesses, to deliver advertising customers a more targeted, lower cost, more data-rich, higher ROI [return on investment] and more diversified multi-product offering.

It hesitates to “quantify the quality benefits” – “however from a qualitative perspective they are a key driver for the transaction”.

The qualitative stuff on quality is where the document is at its weakest. The “transaction specific efficiencies” (the merger and necessary restructure and job losses to reduce costs) are claimed to enable coverage of a greater number of issues/stories.

By de-duplicating coverage so that journalists’ time can be freed up to cover a broader spectrum of issues for example:

(i) Having one journalist at a particular accident scene rather than two

(ii) Having journalists freed up to cover a greater number of issues, including minority interest issues

(iii) Having journalists freed up to cover greater number of sports, including minority sports

(iv) Being able to diversify the offerings of the various platforms and publications

The claims that fewer journalists will cover more issues, and that there will be more coverage of minority sports and minority interests deserve an emoji of a flying pig.

None of this might concern the Commerce Commission unduly. It will be looking at the effect on markets, on advertising and on consumer choice.

Even here, though, there is an understandable gloss put on the deal by the parties.

If the StuffMe entity keeps two big websites, and “diversifies the offerings”, there will likely be one piper calling the tune for advertisers.

And, in some areas such as the real estate advertising market in Auckland there is an undeniable dominance of realtor-placed ads for houses for sale in print newspapers. Putting aside the Property Press for a moment, the Herald and Fairfax’s suburban newspapers have a lock on agents’ print advertising in delivered papers.

There may well have to be carve-outs, where the Commission gives approval for the overall deal but tells the companies they will need to sell certain geographic or Sunday-specific titles.

The bigger question, which isn’t explained in the public version of the application, is whether the merged entity will really be much stronger and for how much longer might its combined size make it a robust competitor to Facebook and Google.

Neither company does what Facebook and Google do – mass social and search – and the merged company won’t either. If that is the problem, then this is not really the answer. Merging buys time.

If approved, jobs will be lost, plurality within these existing mastheads and sites will diminish. If not approved, the two companies will battle each other in what many see as mutually assured destruction while the juggernauts take their revenues and audiences. Jobs will be lost. Titles will close. Plurality will diminish.

The former is probably the preferred path. Combine, rationalise, compete for now and preserve what you can. Napoleon Bonaparte used to exhort his troops before battle: “s’engager puis voir” (engage, then see). That’s a bit hit and hope. But it does have hope.

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